On Feb. 5, 2008, Philippe Lazare, Ingenico's Chief Executive Officer, sent a letter to Hypercom's board of directors, offering to acquire Hypercom for $6.25 per share in cash, reportedly worth approximately $332 million in total. But the offer was conditional on Hypercom's abandonment of its attempt to acquire POS terminal maker Thales e-Transactions S.A., a subsidiary of French aerospace and information technology giant Thales.

On Feb. 8, 2008, Ingenico made the letter public. In addition, Lazare issued this statement:

"Unfortunately, even though we have provided the company with evidence of our ability to finance the transaction and requested customary due diligence, Hypercom has been uncooperative with regards to a reasonable path forward.

"We are prepared to move quickly to execute on a transaction, but are not interested in proceeding if Hypercom consummates its proposed acquisition of Thales.

"We believe that a transaction between Ingenico and Hypercom would create significant value for the shareholders of both companies and urge the Hypercom board of directors to consider it carefully."

In response to Ingenico's letter, Norman Stout, Chairman of the Board of Hypercom, sent a letter back to Lazare on Feb. 11, 2008, stating:

"We are disappointed with your letter today, especially since we discussed our position with you over the weekend, agreed to begin negotiations, forwarded a draft confidentiality agreement to you, sent preliminary terms of a deal with the draft agreement, and expressly made ourselves available to you throughout the day. We heard nothing from you until you issued your letter at the close of market.

"Your insistence on behaving as if this were a hostile overture and playing this out in the public arena causes us to question your motivations in making this proposal."

Stout's letter went on to state that Ingenico had "already filed suit against our financing partner to attempt to block our acquisition of Thales S.A.'s e-transactions business."

The letter referred to the December 2007 announcement that Hypercom had entered into negotiations to buy Thales e-Transactions, a deal reportedly worth $120 million. According to the letter, Hypercom has put down a $10 million deposit to secure the offer.

"The potential harm to our shareholders of our failing to pursue the acquisition of the e-transactions business could not be more real," Stout said. "We received a letter from Thales today [Feb. 11, 2008] stating that they may abort our transaction, retain our deposit and seek other remedies if we do not sign the Stock Purchase Agreement by 8 p.m. Phoenix time on Wednesday, Feb. 13, 2008.

"Unless we sign this agreement by then, we are in jeopardy of losing our $10 million and exposing ourselves to litigation."

Stout added that in discussions with Ingenico, his company's intent has been clear. "We want to maximize value for our shareholders. ... The e-transactions business has significant strategic value to our shareholders, and we would only put it in jeopardy if there was certainty of an agreement that had greater value. The e-transactions acquisition is certain. The Ingenico conditional inquiry is far from certain.

"We want you to remove the threat of suit your counsel has made against Hypercom, not because we believe there is merit in the threat, but because it is a barrier to healthy and productive discussions."

Despite rocky communications thus far, Stout said Hypercom is open to further discussions with Ingenico.

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